Growing wave of companies announcing supply chain shifts

The number of companies announcing supply chain shifts more than doubled in March-April compared with the first two months of the year, according to a Citi study of 71 companies' supply chain adjustment announcements.

The trend of MNC's utilising existing capacity remains dominant (29 out of 71 since 2018), followed by new capacity additions (23 out of 71).

That being said, outsourcing to Asean companies (15 out of 71) has featured more prominently in recent months, especially in labour-intensive industries such as apparels and furniture production.

Acquisition of Asean companies (four examples) remains the least common mode.

In terms of countries benefiting from supply chain shifts, Vietnam remains the largest recipient (39 out of 84 mentions since 2018).

Vietnam and Cambodia feature prominently in capacity addition plans whereas plans in Thailand, Malaysia and the Philippines mainly involved businesses utilising existing capacity, with outsourcing to local firms more prominent in Malaysia.

Based on announcements made in the first five months of 2019, the Philippines is a recent beneficiary - it comes in second, behind Vietnam (14 out of 29 examples) at 5 examples.

The report added that whilst firm level examples suggest the cushion from trade diversion should persist into 2019, a pick-up in investments may materialise only in 2020 at the earliest.